Tuesday, 24 May 2016

General Contractor vs. Construction Manager - What's In A Name

Very often, the difference between a general contractor (GC) and a
construction manager (CM) is not what we believe it to be. The specific
terms and conditions of the contract - not the titles (General Contract
vs. Construction Management Agreement) – are what define the rights and
obligations of the parties. In particular, construction management can
be a very malleable concept.

CM Agreements Can Vary Greatly
First, the term "Construction Manager" embodies more than one contract
model. In a more traditional CM Agreement, the CM is advisor to the
owner, and often acts as the owner's agent; but the owner contracts with
trades and suppliers. In contrast, there is the CM-at-risk model; a
CM-at-risk takes on responsibility for construction, and contracts with
trades and suppliers directly. It is often unclear from the document
title alone whether a particular CM Agreement is one or the other. But
these different CM arrangements are substantially different, both
legally and practically speaking. In my view, a CM-at-risk relationship
has more in common with a GC relationship than it does with a more
traditional CM relationship.

Second, one CM Agreement can differ
quite significantly from another. Pricing and payment structures,
allocation of responsibilities, the procurement process, involvement in
pre-construction, and most importantly responsibility for the design,
work and schedule; all these components that define the relationship
tend to vary not only between GC and CM relationships, but also from one
CM relationship to the next. The CM role is one that lends itself to
customization.

Assumptions Lead to Failures and Disputes
As a result, I have seen a number of owners, contractors – and
particularly construction managers - making the mistake of assuming that
roles, responsibilities and lines of communication are the same from
one construction management relationship to the next. Sometimes it is a
failure to recognize the distinction between a construction
manager-at-risk and other CM arrangements. More often, it is a case of
assuming that a new CM contract is basically the same as the one before.
The fact is, there is a great variety of custom CM and GC contracts in
use, and even "standard" contracts such as CCDC 5A and CCDC 5B* may vary
widely once special conditions are incorporated. Such mistakes can
often lead to legal disputes, as different perceptions regarding the
CM's role can lead to tensions, and assumptions regarding the CM's role
can lead to failures of coordination, supervision, scheduling and
communication.

Read the Contract At its' core, I guess
this post is simply a reminder to read the contract. And… don't pay too
much attention to the title of the contract document. Whether it is
entitled General Contract or Construction Management Agreement (or
something else altogether) is sometimes more misleading than helpful, as
it can lead to incorrect assumptions regarding the relationship
structure and contract obligations.

*CCDC 5A is an example of a more traditional CM Agreement; CCDC 5B is an example of a CM-at-Risk Agreement.

Disclaimer

All posts made to this blog are a general overview of the subject matter and cannot be regarded as legal advice.Please contact Corbin Devlin or any member of our Construction Industry Group for advice on this or any other construction related topic.